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Tuesday, June 14, 2011

Lawler: Early Read on Existing Home Sales in May

by Calculated Risk on 6/14/2011 04:11:00 PM

From economist Tom Lawler:

Based on my tracking of regional MLS that have reported data so far (not as large a sample as I would like), I estimate that existing home sales, as estimated by the National Association of Realtors, ran at a seasonally adjusted annual rate of 4.8 million in May, down about 5% from April’s pace, and down 15.5% from last May’s pace. Unadjusted sales should show a smaller YOY decline, as this May had one more business day than last May.

On the inventory front, active listings appeared to have increased modestly from April to May nationwide, but were down from a year ago in the vast majority of places – in some cases by a lot, in aggregate in the 7-8% range. What that means for the NAR’s inventory estimate, however, is not clear. Over the last several years the NAR’s existing home inventory estimate has shown MASSIVELY larger gains from March to April than have other listings sources (including, but then showed either smaller gains or larger declines than other sources from April to May. In addition, NAR’s YOY inventory decline in April seemed materially lower than other data listing sources suggested.

Based on limited historical data I’d estimate that the NAR’s methodology will result in a reported 2.5% monthly decline in existing home inventory. That combination of sales and inventories would produce a NAR-defined “month’s supply” of 9.4 months, up from 9.2 months in April.

Shifting to pending sales, April’s seasonally adjusted 11.6% drop was surprisingly sharp and only partly explainable by “questionable” seasonal factors. Looking at the limited number of regional realtor associations/MLS/boards that report on “new” pending sales, it appears as if pending sales in aggregate showed a significant rebound from April to May. I estimate that the NAR’s Pending Home Sales Index will show a seasonally adjusted gain from April to May of around 11% -- suggesting that weather, flooding, oil prices, and “other stuff” may have had a temporarily negative impact on contract signings in April and closed sales in May, as well as a temporarily negative impact on other economic data for May.

CR Notes: The NAR reported existing home sales at a 5.05 million seasonally adjusted annual rate (SAAR) in April and inventory of 3.87 million units.

Existing Home Sales Click on graph for larger image in graph gallery.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis through April. Sales in April 2011 (5.05 million SAAR) were 0.8% lower than in March, and were 12.9% lower than in April 2010.

Based on Tom Lawler's estimate, this will be the lowest level of inventory in May since 2006 and sales will decline 15.5% YoY. Of course sales in 2010 were boosted by the homebuyer tax credit.

No word yet on when the NAR will release their benchmark revision (expected this summer - and expected to show significant downward revisions to sales and inventory for the last several years).